Bulgaria Gets the Euro

By Samuel Mendoza Gramberg

Nearly two decades after entering the EU, Bulgaria still lacks substantial economic convergence and remains one of the poorest EU countries. The adoption of the euro in 2026 could mark an economic turning point. Yet instead of euphoria, the introduction of the euro sparked scepticism among many Bulgarians. It was overshadowed by internal political problems, leading to mass protests and, ultimately, the government's resignation. 

On 1 January 2026, the euro replaced Bulgaria's previous currency, the lev, and thereby made the country officially the 21st member of the euro area. Yet Bulgaria has “long been part of Europe’s monetary story” as ECB president Lagarde emphasises. In fact, the lev has been pegged to the euro since 1999 – that is, since the very inception of the single currency. As part of the EU’s eastward enlargement, Bulgaria joined the EU in 2007 and courageously took on the major ‘convergence challenge’. Economic convergence refers to the idea that, by joining the EU and adopting common economic measures such as a common currency and a single market, a country will eventually align itself with European standards and catch up economically with richer EU members. Bulgaria is moving slowly but surely towards this goal. On the one hand, Bulgaria still ranks last with the lowest GDP per capita in the EU. On the other hand, since joining the EU, Bulgaria has managed to narrow the gap compared to the EU per capita GDP from a 40 per cent to a 68 per cent level of the EU average.  Other economic factors also look promising. GDP growth is at three per cent, thus above the EU average, unemployment is at 3.5 per cent low, and most notably, Bulgaria’s debt-to-GDP ratio is something many other EU countries could look to as an example. Bulgaria has a debt-to-GDP ratio – that is, public debt as a proportion of its annual economic output – of 24 per cent, whilst the EU average stands at 87 per cent. In conclusion, the economic outlook for Bulgaria seems relatively decent.

Nevertheless, a month before the introduction of the Euro, mass protests involving an estimated 100,000 demonstrators shook the country. The cause is not directly linked to the euro, but rather to domestic political discontent. According to Transparency International, it is the second most corrupt country in the EU. Furthermore, the judicial system is regarded as unstable and subject to political influence. Ultimately, it was a draft budget for 2026 – which provided for tax increases alongside higher wages for the civil service – that proved to be the last straw. One day after the protests, the government announced its resignation, leading ultimately to the eighth parliamentary election in five years.  In the wake of this domestic instability, the question arises as to whether Bulgaria is ready for the euro and what impact the introduction of the euro might have.

An entire branch of economics is devoted to the question of the Optimum Currency Area. In general, economic theory suggests that a common currency has both benefits and costs. The benefits include, for example, lower transaction costs in trade and investment, as no currency exchange is required. Furthermore, there is less exchange rate uncertainty between member states, and a single currency enhances monetary credibility, provided the central bank is trustworthy and independent of governments. These benefits apply to a significant extent in the case of Bulgaria. Firstly, because both exports and imports with other EU member states account for around 60 per cent of Bulgarian trade and would thus benefit from a single currency and lower transaction costs. Secondly, tourism in Bulgaria is a growing economic sector which contributed 6.7 per cent to its GDP. Joining the eurozone is expected to reduce friction in capital flows and lower currency risk. For investors in the tourism sector, this means more predictable returns and simplified cross-border business operations

The costs of a single currency relate to the inability to set interest rates independently. When a country is part of a single currency area, it cannot respond flexibly to country-specific recessions, for example, by devaluing its currency to boost competitiveness. However, these costs do not apply in the case of Bulgaria: As the lev has been pegged to the euro since 1999, Bulgaria abandoned its independent monetary policy long ago. In fact, joining the eurozone will give Bulgaria greater leverage and influence over the ECB’s decisions, as the President of Bulgaria’s national central bank will sit on the ECB’s Governing Council.

Rumen Raev and his Progressive Bulgaria (PB) Party won the parliamentary elections in April with 44.7 per cent of the vote.  In particular, the significant lead over his rivals—who each secured only around thirteen per cent of the vote—could prove decisive in bringing an end to political instability. The former Air Force general is by no means a newcomer to politics; Radev already has a long political career behind him, during which he served as president for nine years. He is now the prime minister and, unlike the mainly ceremonial role of the president, wields considerably more political influence. Above all, he has made it his mission to combat corruption and the ‘oligarchic model of governance’. On the international stage, whilst remaining formally committed to a strong Europe, he has also advocated for restoring ties with Russia and has opposed military aid to Ukraine.

Introducing the euro offers several potential benefits for Bulgarian trade, the tourism sector, and the broader economy. Whether Bulgaria’s euro adoption will ultimately mark the country’s true European breakthrough, however, will depend less on the currency itself than on the government’s ability to provide political stability, strengthen institutions, and restore public trust. 

Source: The Economist, Reuters, The European Commission, BBC, UN, IW Köln, DW

Written by Samuel Mendoza Gramberg

Edited by Sarah Valkenburg and Gabrielle Ludes